Financial Planning For Homemakers

Source: The Hitavada      Date: 06 Nov 2017 11:32:04


Anju’s husband Harish gives her a lump sum of Rs 20,000 to run the house on a monthly basis. This money is used to cover the family’s living expenses, buying groceries, paying utility bills and other such expenses. All was well until the company that Harish was working with started laying off people to cut costs during a financial crunch. The result? Harish lost his well-paying job.

Three months passed by, but Harish was still unable to find a job. Due to this, he was also unable to pay EMIs on his Home Loan and Car Loan, and was forced to borrow money from friends and relatives. The family was on the brink of bankruptcy since they inevitably exhausted their savings.
If you’re a homemaker thinking that something like this will never happen to you, think again. It need not always be a job loss. It could be a death or an earning member or even divorce or separation from your partner. So, are you prepared? What would you do if you were Anju? Financial planning is crucial and it’s not only important in such scenarios, but it also helps if things are all going fine.

As a homemaker, you play a very important role in the functioning of your family. It’s a given that homemakers run the entire household while taking care of kids and the elderly, and maintaining an orderly and systematic routine that’s essential for a family to function on a day to day basis. Even if you aren’t employed, or were previously working, or have never worked before, you are an integral part of the family and are at par with the family’s bread-winner.

And while you handle your duties with utmost devotion and care, you might not really be prepared for a financial crisis. But, worry not! We’ll give you some great tips on financial planning that will help you leverage your role as a homemaker.

Make A Budget: Most homemakers are master-planners, especially when it comes to a household budget. But, it’s also easy to get carried away in the absence of one. Your budgeting knowledge shouldn’t just be restricted to grocery shopping. Considering that you’d (both you and your partner) have a bunch of other bills and EMIs to consider, you can broaden your budgeting by including these expenses too.

Creating a budget for all these total expenses will give you an overall idea about how much you spend as a family every month. This information is crucial when you have to make bigger financial decisions like buying something expensive, or planning a vacation, or even planning a child.
And this doesn’t require you to have Einstein by your side. Its basic calculations done on what your total income is minus your total expenditure. The remainder should either be saved or invested wisely.

Sticking To The Budget: Well, if you’re one of those who only makes plans without materialising them, then you sure need some coaching when it comes to sticking to a budget. Because let’s face it, it’s easy to make a budget, but is it really easy to stick to it? Well, not for everyone.

Sure, you can’t always be prepared for unpredictable expenses, but when you prepare a budget, it lets you take stock of your finances, making it better for you to plan for contingencies. And that’s why once you make a budget, you’ll have to stick to it.

Identify The Big Expenses: If you’ve been running a house for even as little time as a few months, you’d know exactly where and how much is being spent regularly. The usual expenses like groceries, utility bills, rent, or other EMIs will remain constant. But, in due course of time you may have some slightly bigger expenses to deal with, say for instance, buying a washing machine, renovating your house, or even something more ad hoc like a medical emergency.

These unavoidable expenses may burn a big hole in your pocket and will hamper the overall budgeting of your household. Therefore, if you know for sure that you have a big expense coming up, prepare for it. The most important thing is to identify these expenses and prepare for them over the course of time. You can either save up for it, or simply cut down on your other costs to accommodate this purchase.

Divide Expenses: After identifying the big pocket burners, the next thing to do would be to split them across the months/years so that you don’t feel the pinch all at once. Having to pay for something that you haven’t budgeted for can be heavy on the pockets and will disrupt the whole quotient of your budgeting. In the long run, dividing your expenses will prove to be an effective way to manage expenses.

Still confused about how to do it? Take for instance you want to go on a vacation to Europe. A vacation like that definitely needs months of planning. So, start early. If your target is to do it after six months, then you do one task/payment pertaining to that vacation every month. In the first month you can book your tickets, then wait until the next month to apply for your visa and pay visa fees. The month after that you can book hotels online and so on. This way you wouldn’t be spending a large amount in just one month to pay for your vacation. It’s much easier on the pockets.

Likewise, you can apply this strategy for other big purchases too. If you want to buy a high-end smartphone, you can swipe your Credit Card for the whole amount and convert that amount into monthly instalments with no interest at all.

Save Smartly: Often, when you hear someone asking you to save, do you simply stack cash under your mattress or keep it ‘safe’ in a cookie jar? If you’re doing it, you need to stop. Because saving smartly isn’t collecting hard cash in different boxes around the house. Let’s face it – money doesn’t multiply on its own and unless you make your money work for you, it’s only going to lie there like a piece of furniture.

Start by getting yourself a Savings Bank Account, or put your money in a Fixed Deposit Account. Not only will you earn interest on it, your money will also be safe. If you aren’t a big fan of these accounts, start saving in smaller savings schemes like the Postal Savings.
Create An Emergency Fund: An emergency fund should be everyone’s top priority, irrespective of who you are and what you do. Creating an emergency fund will help you prepare financially to face any random unavoidable emergency. This fund can be used during a cash crunch or for a medical emergency too in the absence of a Health Insurance.

However, one thing to keep in mind is that this fund should be used only during an absolute emergency. Sometimes you may be tempted to use this money to pay for things you want rather than need. It’s easy to get carried away, and especially if this money isn’t put away, you’ll just end up using it. Hence, it makes sense to save your emergency fund in a separate bank account which can be easily liquidated.

Invest Your Savings: Enough has been said about saving money. But there’s no point if you’re going to save money without investing it, thus restricting your potential to earn returns on these investments.
When it comes to investing, let your partner not be the only one who does it for your family. If your knowledge on stocks and shares is limited, you have a whole lot of other options to invest in as a homemaker. As a homemaker you can start investing in Mutual Funds, and with a Systematic Investment Plan (SIP), you can choose an amount as small as Rs. 500 to begin with. But, do read the fine print before getting started.

Keep Yourself Updated: Being a homemaker is a big responsibility, because you have tonnes on your plate and you are constantly juggling and making things work. And sometimes amidst all the chaos you may not have enough time to dig deeper into your family’s financial matters. But, you can take matters in your own hands even in this area.
By subscribing to well-written blogs and informative articles on finance, you can always read up and increase your knowledge and keep yourself updated about personal finance and other related topics.

Work From Home: Financial independence is the most important thing in life, next to breathing! And sometimes, it’s equally important to have some money that you can call your ‘own’. Although your primary responsibility may be in being a care giver to your kid or managing your house, you should come up with a plan to secure your financial independence in whatever small or big way possible.

Unlike the old times, when women like our grandmothers had to choose between a career and family, women these days can juggle both. And do so with great ease. With so many work from home options available these days, it’s rather easy and also convenient to get a lot of jobs online. You can earn a decent amount without having to step out of your house if you can afford to spend two hours of your time from your daily chores.

Being a homemaker means that you’re working round the clock to keep things moving for you and your family. An effective financial planning strategy will only enable you to function better amongst all your daily chaos.
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